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Banks’ crippling charges and switching stand-off

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Created on Tuesday, 23 August 2011 16:58

The Treasury Select Committee are pushing the Independent Commission on Banking (ICB) to press the Government into taking action to make bank charges clearer and switching between bank accounts easier. In the meantime, this triangle of pressure is causing account holders unnecessary costs and loss of choice, while the Financial Services Authority and the Treasury Select Committee argue about taking action.

This betrayal of customers’ rights cuts deeper when, to a great extent, the issue of clearer information to promote fairer competition was addressed in Northern Ireland as early as 2007.

A quote from the Northern Ireland Competition Commission inquiry in 2005 said, “Lack of clarity on charges and unduly complex charging structures and their application, combined with a reluctance among customers to switch providers, are restricting competition in the market for personal current accounts in Northern Ireland. These features make it likely that customers incur higher charges and receive lower levels of credit interest than they might expect in a more competitive market.”

Following the inquiry and consultation with banks, associated bodies and regulators, there was unanimous agreement to adopt measures that provided better deals for customers starting with using plain English for key information for personal current bank accounts.

The final recommendations included requirements for banks in Northern Ireland to describe their personal current account services in plain English, using terms that are easy to understand.

Chrissie Maher OBE, founder of Plain English Campaign says, “At that time, it felt like a huge step forward in banking information, but it’s disappointing that that step hasn’t been big enough to cross the Irish Sea as yet. The learning is there to be shared, but customers continue to lose out.

If it’s unrealistic to share the experience and learning of expert bodies, then it’s up to individuals to take up the responsibility of communicating clearly, rather than waiting for recommendations or legislation.”

Three years on, and Northern Ireland’s Consumer Council’s (NICC) review of the recommendations shows that overall levels of customer satisfaction have increased, and switching of accounts is viewed more favourably by account users.

The Northern Ireland Banking Order 2011 now requires banks operating in Northern Ireland to communicate clearly; words must be understandable, clear and comprehensible. The NICC continues to meet with the banks to gain support for their banking manifesto covering current accounts which also covers clear communications. Some of the banks have trained staff to write communications using plain English and others now test communications with groups of consumers. While the NICC continues to monitor progress, consumers confirm that they want letters from banks to be clear and easy to understand. The success of this simple act of providing clear information must be a further frustration for confused bank account holders on mainland UK. Indeed, a statement on The House of Commons website raised concern that,

“In total the ICB has devoted just one page of its interim report to measures to improve the switching process and enhance transparency. Their proposals on switching and transparency of charges to the customer need further development; indeed the interim report does not move forward the debate on this crucially important issue. We urge the ICB to devote sufficient attention and resources to switching and transparency and, to this end, to work more closely with industry, consumer groups and other relevant bodies. (Paragraph 90)”

The complexity of information and charges can be seen by people to be a smokescreen for hiding the true cost of banking, and intentionally preventing customers from switching to more beneficial products.

While the experts continue to discuss technicalities, Plain English Campaign calls for banks to take action independently and give their customers clear and honest information by using plain English in their personal current account literature and, indeed, any other account information.

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